Saturday, April 08, 2006

Richard Inder: Time to wave the flag and stop transtasman flight

A disclosure - I really don't give a toss about Super 14 rugby.

I find the endless prognostication over the success of this franchise or the next boring in the extreme. I shudder as I watch One News weekend presenters Bernadine Oliver-Kerby (or does she now have a new name?) and Tony Veitch spar mindlessly over whether the "Canes" will do it again in the week ahead.

And, more to the point, I despair at most New Zealanders' enthusiasm for the competition. The very fact that Oliver-Kerby and Veitch can abbreviate the name of one of the leading franchises on national television is testimony only to the nation's gullibility and the brilliance of the series' creator, media tycoon Rupert Murdoch.

The way I feel for each and every team is the same as most feel for a packet of cornflakes, wine biscuits or a can of Coke.

The NPC and the All Blacks test matches are, however, another matter.

They (generally) pit our boys against theirs. I have stood up and joined the roar at Jade Stadium/Lancaster Park when Canterbury score because I identify with the region. I am a Mainlander and a New Zealander. I grew up breathing the same air as the players. They are my kin.

Still, New Zealanders' passion for the Super 14 franchise may have a silver lining. Even though most believe they are cheering the players, they are in fact largely cheering a board, a chief executive and a management team.

It is therefore, perhaps, not an empty hope that these sentiments can be harnessed for other New Zealand businesses.

Fletcher Building's signal this week that it is looking to shift its headquarters to Australia illustrates just how great the need is.

At the risk of repeating a well-traversed argument, $4.1 billion Fletcher Building is the country's third-largest listed company. The building products giant underwrites a substantial portion of the infrastructure necessary for a healthy and robust capital market.

Its move would be likely to drive the bulk of trading in its shares offshore, adding to the damage wrought on the capital market by losses and takeovers such as Ports of Auckland, NGC, Powerco and Carter Holt Harvey.

The planned takeovers (and let's not beat around the bush, these are takeovers) of Contact Energy and Waste Management by Australia's Origin Energy and Transpacific Industries respectively continue a disturbing trend.

The simple facts of the matter are these: New Zealand companies are vulnerable because their Aussie rivals enjoy much lower financing costs. This is because financial markets across the ditch are awash with capital, thanks to the country's compulsory superannuation scheme.

The offer of a wodge of cash is hard to resist. Indeed, Fletcher Building chief executive Ralph Waters' soft-pedalling of his potential move this week should not invite complacency.

Unless we reverse our savings record, the pressure on Fletcher Building and others will only mount. If local markets do not have the capital to fund growth or give companies like Fletcher Building the sharemarket rating they deserve, then they will have to look further afield.

There is little in the short term at least that will correct the deficit. So, the time has come to run up the flag, to pipe God Defend New Zealand through our workplaces, to invoke Gallipoli, the lovely Sarah Ulmer, Ernest Rutherford, Kiri Te Kanawa and Ed Hillary.

As NZX boss Mark Weldon notes today, ownership matters. We should strive - as much as we can afford - to hold on to our New Zealand-owned and listed companies until a stonking great offer beyond all doubt is put on the table.

Transpacific may be offering a good price for Waste Management. To tell the truth, I do not really know, but I know it is at the least debatable.

Waste Management is a New Zealand success story. During the past five years, its shares have more than doubled. As Transpacific boss Terry Peabody noted this week, it may have a bright future as part of a large Australasian waste disposal company. But I am yet to be convinced it does not have a robust future as an independent entity.

Contact Energy is a much less difficult choice. Even though its shares are trading at around the $8.05 to $8.20 implied by Origin's takeover proposal, professional investor distaste for the plan should be enough to derail it.

Although both have plans to retain an NZX listing, the bulk of their share trading will be done overseas. Key strategic decisions will be made from an Australian perspective.

The NZX and the country need these companies to remain predominantly New Zealand-owned and listed. If they go, we are further along the road to the state deftly described by Brook Asset Management principal Paul Glass - an economy where innovative companies struggle to raise capital and our children have to go abroad to get the challenging jobs and opportunities we now enjoy.

Even if the profits are not as good, they will still be our profits.

And they, with the rest of the companies listed here, may be enough to carry us while we make the structural changes needed to put our savings and investment regime back on track - the introduction of a more sensible tax regime, the ditching of barmy redistribution schemes such as Working for Families and, yes, the introduction of a compulsory savings scheme.